The US Supreme Court stops Montana taxing marijuana it had already destroyed

In the autumn of 1987 Montana began taxing marijuana. Not legal marijuana, which did not exist, but the drugs that police found. Two weeks after the law took effect, officers raided a farm in central Montana, and the state went on to send the family who ran it a bill for almost $900,000. Seven years later the United States Supreme Court decided that the bill was not a tax at all, but a second punishment.

A tax that began with an arrest

The Dangerous Drug Tax Act took effect on 1 October 1987. It imposed a tax “on the possession and storage of dangerous drugs” at 10 percent of their market value or a fixed amount per ounce, whichever was greater.

Drug	Fixed rate
Marijuana	$100 an ounce
Hashish	$250 an ounce

Nobody had to pay it in advance. The duty to file a return arose only on arrest, within 72 hours, and an officer could complete the form if the suspect refused to sign. The tax was collected only after any fines and forfeitures had been satisfied.

The Kurth family’s bill

The Kurths had long run a grain and livestock farm. In 1986, the Court recorded, “they began to cultivate and sell marijuana.” After the raid all six people charged reached plea agreements; in July 1988 Richard and Judith Kurth were sentenced to prison and the other four to suspended or deferred sentences. They also forfeited $18,016.83 in cash and equipment.

The Department of Revenue then assessed taxes, interest and penalties of $894,940.99 on 2,155 plants, harvested marijuana, hash tar and hash oil. The family filed for bankruptcy, and the bankruptcy court found most of the assessment invalid under state law. It upheld only $181,000 on 1,811 ounces of harvested marijuana, and then struck that down as double jeopardy. The district court and the Ninth Circuit agreed.

“A concoction of anomalies”

Writing for the Court on 6 June 1994, Justice Stevens accepted that a state may tax illegal goods. But this tax had every mark of a penalty. Part of the assessment came to more than eight times the drug’s market value. Its aim of deterring was “beyond question”. It fell only on people arrested for the very conduct being taxed. And it was “levied on goods that the taxpayer neither owns nor possesses”: the state had presumably destroyed the drugs before it taxed them.

“Taken as a whole,” the Court wrote, “this drug tax is a concoction of anomalies.” Since the Kurths had already been punished in the criminal case, a tax of this kind “must be imposed during the first prosecution or not at all.” Chief Justice Rehnquist and Justices O’Connor and Scalia each wrote a dissent.

What it left standing

The ruling did not forbid drug taxes. It held only that a tax this punitive, imposed after a conviction for the same conduct, counts as a second punishment. A state that wished to collect such a tax would have to do so as part of the first prosecution.^[1]